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Jewish World Review April 6, 2001 / 13 Nissan, 5761

Jonathan Weber

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The West falls, but it will rise again


http://www.jewishworldreview.com -- IN the age of the Internet, people once thought "place" would be irrelevant. But place - particularly the West, and especially Silicon Valley - was at the heart of the business and technology revolution that came to be known as the Internet Economy. That revolution is now in retreat, and its struggle represents nothing so much as the triumph of the Eastern establishment over the renegades of the West.

Nearly all of the attributes of the Internet Economy can be thought of as attributes of West Coast business style. The Western landscape is dominated by newfangled companies that are, first of all, new. They do not have a century of history like their Eastern rivals. They do not have old brick buildings and retirees and long-standing bonds to their communities. What they do have is a clean slate: a greenfield site south of San Jose, Calif., (or in Nevada or Arizona) or perhaps a refurbished warehouse, and the freedom to build an organization in a different kind of way.

West Coast businesses are more informal in style, and style matters. The well-worn caricatures - the executive in khakis and open-collar shirt, or the twentysomething Web developer with pierced eyebrows and a skull-and-bones T-shirt - are not empty symbols. They are statements that hierarchy and appearance matter less than skill.

Businesses of the West are either creating technology, or they are about the opportunities presented by technological change. While established corporations tend to be suspicious of such advances, for good reason, the West is all about the new, new thing. There is an inherent belief, right or wrong, that technological progress is for the good of mankind and that building great tech businesses is thus a higher calling.

Most important, the West is about entrepreneurs. To start your own thing is good, to own a piece is good, to fail is OK, at least from a moral standpoint. The energy comes from the sense of boundless opportunity, just as it has for Western migrants through the ages. The safety of the corporate citadel, well, it's boring and repressive.

The American West's power has been growing for decades, shifting the nation's center of gravity. The West's population grew by 16 percent in the 1990s; the Northeast's increased 2 percent. The Western states' proportion of GDP has climbed steadily. While this growth had once been driven by aerospace, entertainment, natural resources and many kinds of manufacturing, today the engine is technology.

Apple, Intel, Microsoft, Oracle and Sun Microsystems - the list of world-beating companies that have sprouted in the West is long and growing. But the West's gains in recent years lie not in its dominance of technology; rather it's that tech itself has come to dominate the traditional economy.

The revolutionary premise of the past few years was that tech companies would overthrow the established order in non-tech industries. It was one thing for venture capitalists to make a few bucks on arcane software and semiconductor companies. It was quite another for them to take on Merrill Lynch, Time Warner and Wal-Mart.

The greatest drama lay in the West's attack on the twin strongholds of Eastern corporate power: finance and media. The West has traditionally functioned as a back lot for Eastern financiers, be it in movies, mining or metal-bending. But the rise of the West Coast investment bankers and the brokerages built on online stock trading posed a threat of a different order.

Meanwhile, new media companies were promising to redefine publishing and entertainment. Microsoft started thinking of itself as a media company. Yahoo emerged as a major destination for news and information. Salon.com and Slate suggested that even the high-brow opinion magazine, about as East Coast an institution as there is, could be remade along Western lines.

As it has turned out, the old order was not being made obsolete so quickly. There was extraordinary hubris in the belief that the Net would change everything overnight. A lot of high-minded rhetoric was just a cover for greed.

The West over-reached, and it's being punished. Most dot-coms are dead. Tech firms are bleeding. The Asian economic miracle and the promise of the "Pacific century" have lost steam. The broader economic consequences, for California especially, are just beginning to be felt.

The East Coast media, which tends to cover California as if it were a foreign country, has changed its tone from giddy enthusiasm to I-told-you-so gloating. And why not? What a relief for traditional media companies not to have to worry about the Net. What a relief for money managers not to have to worry about missing the next wave. What a relief for everyone with a stake in the status quo to know that they can keep doing what they've always done.

But whatever the stock market is doing today, the reality is that change keeps accelerating. There isn't anything so wonderful about the ways of Wall Street or Madison Avenue that makes them invulnerable. There is much phoniness in new-economy rhetoric, but there is also truth.

The impact of the tech economy implosion, which may be sending the global economy into recession, shows the extent of the change. Even conservative companies now acknowledge that technology is central to their future. The West's business culture has infused much of the country. Most Americans believe in the benefits of technology. They want a stake in their enterprise. They want their labors, rather than their patrimony, to determine their success.

No region has a monopoly on business innovation, and partisans of New York, Boston and other locales will rightly point out that their people and companies still lead in many areas. In turn, some West Coast firms have started to adopt the old-style bureaucracies that they once scorned. No doubt the next few years will present an identity crisis for the West and for the Western state of mind as the technology world rides through a severe cyclical slump.

There will be humiliation, even, whether it be the inability to keep electricity flowing or the sudden decision by a company like Boeing to move its headquarters to Middle America.

But the long-term trends are unaltered. Across the West, in the biotech labs and the chip research parks and the hearts and minds of the entrepreneurial masses, the flame of innovation still burns bright. It is only a matter of time before the West rises again.



Jonathan Weber is a writer for The Industry Standard. Comment by clicking here.

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